WHERE BUSINESSMEETS INNOVATION
JENNIFER L. SCHENKER:
JAMES SILVER,ERIC SYLVERS, D’ARCY DORAN
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While many retail banks are still tryingto layer basic digital services on topof clunky legacy systems Moven hasmoved into the market. The digital-only bank is attracting young customers by using mobile phones as primary pay-ment devices, replacing credit cards,debit cards and cash; offering its cus-tomers an innovative way of trackingtheir spending by categorizing transac-tions and creating a purchasing behav-ior prole that allows for adjustments;and granting its customers the ability toimprove their nancial health by bring-ing in friends from social networks.There is also a Weight Watchers-likesystem of rewards and bonuses for goodnancial behavior.
Given its global ambitions and its ini-tial target customer base — the over 80million millennials in the U.S. who areexpected to become a driving force inthe economy within ve years — it is notsurprising that Moven, which launcheda beta product into the market in April of this year, was able to raise an additionalround of venture capital last month. (InAugust 2012, Moven announced $2.41million in seed round funding from An-themis Group and Raptor Ventures.)The new investor is Life.SREDA, aventure fund owned by a group of eightRussian commercial banks, marking therst time that any of the digital-only neo-banks have raised money from a tradi-tional bank.It is unlikely to be the last. “I woulddenitely expect more traditional bankslooking to make digital investments,”says serial entrepreneur Scott Bales,Next Bank’s Singapore-based directorof user strategy innovation and a Movenboard member. “Many of the traditionalbanks are already very aware of the be-havioral shift driven by digital. So I’d ex-pect them to make strategic investments,if not acquisitions, in the digital space.”(See the story about banks partnering with payment and foreign exchangestart-ups on pages 4 and 5.)While digital interlopers like Movenwere at first ignored or greeted withskepticism by traditional banks, this is nolonger the case. Some banks have alreadystarted copying their best-of-breed ser-vices. BNP Paribas, for example, recentlylaunched a standalone digital mobilebank, Hello Bank!, in Belgium, Germanyand France, with plans to open in Italyin October, to counter competition fromdigital-only banks.Billed as a ‘native mobile bank,’ HelloBank! accounts can be opened in just foursteps from an Android or Apple smart-phone or tablet or over the Internet. Thedigital-rst approach is backed by a teamof staff working extended hours six daysa week to answer queries via chat, email,tweet and phone. Hello Bank! users alsohave access to BNP Paribas’s extendedbranch network and online brokeragevia Cortal Consors in Germany. BNPParibas has said it hopes to attract 1.4million customers for the service overthe next ve years.Ease of use, an engaged customer base,differentiated distribution (no branches)and strong digital (mobile and Web)support are all the rage, but it is a newapproach to the basic day-to-day bankaccount that is resonating with digitalnatives, Brett King, Moven’s founder andCEO, explains in a blog post.Among the neo-banks only Germa-ny’s Fidor Bank has a banking license.Others like Simple and Finland’s Holvirely on the back offices of traditionalbanks. Although they are proving at-tractive to digital natives the neo-banksremain niche players. Some may end uplicensing what they do best to traditionalbanks, says Uday Goyal, a co-founderat Anthemis Group, an investment andconsulting group specializing in 21st-century nancial services. Anthemis isan investor in Simple, Moven and FidorBank and recently revealed that it hasraised an undisclosed amount of invest-ment from Life.SREDA.But not all neo-banks are ready tocontent themselves with just a slice of the market. “I think in the short termdigital-only banks will start with suc-cess in one product vertical, but quicklydiversify to other verticals as they scale, just like Amazon did, starting in books,and spreading to all online retail,” saysBales, who is also a scheduled speaker atSibos. “Right now there are key engage-ment verticals in which the neo-banksare nding success, and in time that suc-cess is only going to grow, fast.”
JENNIFER L. SCHENKER